Question 1

The impact of crowding out

Accepted Answer

A) is larger in a closed economy as compared to an open economy. 
B) is larger in an open economy as compared to a closed economy. 
C) is larger in an open economy as compared to a closed economy when fiscal policy is contractionary. 
D) is larger in a closed economy as compared to an open economy when fiscal policy is contractionary. 
A) is larger in a closed economy as compared to an open economy. 
B) is larger in an open economy as compared to a closed economy. 
C) is larger in an open economy as compared to a closed economy when fiscal policy is contractionary. 
D) is larger in a closed economy as compared to an open economy when fiscal policy is contractionary.

Question 2

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Accepted Answer

In a closed economy,expansionary fiscal

Question 3

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

Accepted Answer

A) 94 
B) 115 
C) 128 
D) 153 
A) 94 
B) 115 
C) 128 
D) 153

Question 4

In an open economy,expansionary monetary policy will cause

Accepted Answer

A) consumption,investment,and net exports to rise. 
B) consumption and investment to rise,but net exports will fall. 
C) consumption to rise,but investment and net exports will fall. 
D) consumption to fall,but investment and net exports will rise. 
A) consumption,investment,and net exports to rise. 
B) consumption and investment to rise,but net exports will fall. 
C) consumption to rise,but investment and net exports will fall. 
D) consumption to fall,but investment and net exports will rise.

Question 5

Based on the following information,what is the balance on the financial account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S.holdings of assets in foreign countries = -$1 billion

Accepted Answer

A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion 
A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion

Question 6

Why does continued foreign investment in U.S.stocks and bonds and foreign companies continuing to build factories in the United States result in a current account deficit in the United States?

Accepted Answer

The willingness of foreign investors and

Question 7

Net foreign investment is a measure of net capital outflows,equal to capital outflows minus capital inflows in a given period of accounting.

Accepted Answer

A) True 
 B)False

Question 8

Fiscal policy has a greater impact in a closed economy than it does in an open economy.

Accepted Answer

A) True 
 B)False

Question 9

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

Accepted Answer

A) decrease net exports. 
B) decrease the balance of trade. 
C) increase the current account balance. 
D) decrease the financial account. 
A) decrease net exports. 
B) decrease the balance of trade. 
C) increase the current account balance. 
D) decrease the financial account.

Question 10

What impact might a decrease in the U.S.federal budget deficit have on interest rates and exchange rates in the market for the U.S.dollar? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar. )

Accepted Answer

A) Interest rates and exchange rates increase. 
B) Interest rates increase and exchange rates decrease. 
C) Interest rates decrease and exchange rates increase. 
D) Interest rates and exchange rates decrease. 
A) Interest rates and exchange rates increase. 
B) Interest rates increase and exchange rates decrease. 
C) Interest rates decrease and exchange rates increase. 
D) Interest rates and exchange rates decrease.

Question 11

A Canadian oil company hires geological survey services from the United States.If all else remains equal,this will

Accepted Answer

A) increase net exports. 
B) increase the balance of trade. 
C) decrease the current account balance. 
D) increase the financial account. 
A) increase net exports. 
B) increase the balance of trade. 
C) decrease the current account balance. 
D) increase the financial account.

Question 12

If the current account is in deficit and the capital account is zero,then

Accepted Answer

A) the financial account must be in surplus. 
B) the balance of trade must be in surplus. 
C) the balance of payments must be in surplus. 
D) there is a capital outflow. 
E) the balance of services must be in surplus. 
A) the financial account must be in surplus. 
B) the balance of trade must be in surplus. 
C) the balance of payments must be in surplus. 
D) there is a capital outflow. 
E) the balance of services must be in surplus.

Question 13

Which of the following is true about the occurrence of the twin deficits?

Accepted Answer

A) They always occur together. 
B) They only occur when exchange rates are fixed. 
C) They did not occur after 1990 in the United States. 
D) They occur consistently in all the economies of the world except the United States. 
A) They always occur together. 
B) They only occur when exchange rates are fixed. 
C) They did not occur after 1990 in the United States. 
D) They occur consistently in all the economies of the world except the United States.

Question 14

The federal budget deficit and the trade balance are often referred to as the

Accepted Answer

A) balance of payments. 
B) dueling depreciators. 
C) twin deficits. 
D) national debt. 
A) balance of payments. 
B) dueling depreciators. 
C) twin deficits. 
D) national debt.

Question 15

A decrease in capital outflows from the United States will

Accepted Answer

A) decrease the balance on the financial account. 
B) increase the balance on the financial account. 
C) increase the balance on the capital account. 
D) decrease the balance on the current account. 
A) decrease the balance on the financial account. 
B) increase the balance on the financial account. 
C) increase the balance on the capital account. 
D) decrease the balance on the current account.

Question 16

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Accepted Answer

A) True 
 B)False

Question 17

Figure 29-1  
-Refer to Figure 29-1.The appreciation of the dollar is represented as a movement from

Accepted Answer

A) B to A. 
B) D to C. 
C) C to B. 
D) C to A. 
A) B to A. 
B) D to C. 
C) C to B. 
D) C to A.

Question 18

A decision by foreign central banks to sell their holdings of U.S.Treasury bonds will

Accepted Answer

A) lower bond prices and interest rates in the United States. 
B) increase bond prices and interest rates in the United States. 
C) increase bond prices and lower interest rates in the United States. 
D) lower bond prices and increase interest rates in the United States. 
A) lower bond prices and interest rates in the United States. 
B) increase bond prices and interest rates in the United States. 
C) increase bond prices and lower interest rates in the United States. 
D) lower bond prices and increase interest rates in the United States.

Question 19

The purchase of foreign stocks and bonds by a U.S.brokerage firm is an example of capital inflows to the United States.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following will shift the demand for the euro to the right?

Accepted Answer

A) an increase in interest rates in the European Union 
B) an increase in incomes in countries that buy goods from the European Union 
C) expectations among speculators that the price of the euro will rise in the future 
D) All of the above will shift the demand for the euro to the right. 
A) an increase in interest rates in the European Union 
B) an increase in incomes in countries that buy goods from the European Union 
C) expectations among speculators that the price of the euro will rise in the future 
D) All of the above will shift the demand for the euro to the right.

Exam 29: Macroeconomics in an Open Economy

The impact of crowding out

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

In an open economy,expansionary monetary policy will cause

Why does continued foreign investment in U.S.stocks and bonds and foreign companies continuing to build factories in the United States result in a current account deficit in the United States?

Net foreign investment is a measure of net capital outflows,equal to capital outflows minus capital inflows in a given period of accounting.

Fiscal policy has a greater impact in a closed economy than it does in an open economy.

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

What impact might a decrease in the U.S.federal budget deficit have on interest rates and exchange rates in the market for the U.S.dollar? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar. )

A Canadian oil company hires geological survey services from the United States.If all else remains equal,this will

If the current account is in deficit and the capital account is zero,then

Which of the following is true about the occurrence of the twin deficits?

The federal budget deficit and the trade balance are often referred to as the

A decrease in capital outflows from the United States will

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Figure 29-1 -Refer to Figure 29-1.The appreciation of the dollar is represented as a movement from

A decision by foreign central banks to sell their holdings of U.S.Treasury bonds will

The purchase of foreign stocks and bonds by a U.S.brokerage firm is an example of capital inflows to the United States.

Which of the following will shift the demand for the euro to the right?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

The International Financial System

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